Americans often borrow against the value of their homes. They get second mortgages to pay for higher education, home improvements, or starting small businesses.
But what if they couldn’t prove that they owned their homes? Lenders would be much less likely to loan. What if families couldn’t secure ownership rights at all, even if they’d lived there for generations?
That is the problem facing millions around the world.
It wasn’t until clear, legal, and strictly
enforceable property rights were established that the growing prosperity of
nineteenth and twentieth-century America was possible. With established
ownership rights, settlers could borrow against the value of their land,
investing to greatly increase their incomes.
“Without title, ‘squatters’ must protect their residence from intruders and eviction. Someone stays home and defends the property instead of working in the labor market.” This is hardly the most effective use of capital.
Peruvian economist Hernando de Soto has written about this problem for years. His book, The Mystery of Capital, points out the tedious nature of obtaining title to land.
In the Philippines, for instance, de Soto
reports it takes 168 steps to acquire title. This could take up to 25 years.
He encourages land titling, which simply awards ownership rights to those
who have occupied a piece of land for a certain amount of time. The concept
was used successfully in nineteenth 19th century America. It leads to much
more productive land use.
Higher incomes would also allow governments
to tax their citizens at higher rates. This provides funds for better roads,
irrigation, and other needed services.
The poor need more control of their own future to escape the “poverty trap.” One excellent way to help achieve this is through legal home ownership.
May 25, 2008